http://www.ft.com/cms/s/0/c51d4426-8573-11e0-ae32-00144feabdc0.html#axzz1NASeVcbO
The value of work awarded to UK construction companies crashed during the past year, raising concerns that the impact of government spending cuts will be far worse than previously feared.
The total value of new work awarded to the UK’s 50 leading construction companies fell by 39 per cent during the 12 months to May, compared with the same period a year earlier, as school, hospital and road building projects were shelved.
Balfour Beatty, the UK’s largest construction company by sales, saw the value of orders in the UK fall from £7.4bn to £3.3bn during the period.
Meanwhile, Kier, a top five builder, saw a decline of £800m in the value of new contract awards to £1.6bn. Paul Sheffield, Kier’s chief executive, said the fall across the industry was sharper than he had expected.
“You never know how much to read into this data, but it is sending a signal; there isn’t as much work coming down the pipeline, especially while there is this hiatus on public sector activity,” he said.
The slowdown in workloads comes as the industry grapples to overcome two years of decline and its sharpest fall in activity for 35 years.
The cuts in spending on education, health and transport projects has already taken a toll on the building sector, with flagship Labour schemes, such as Building Schools for the Future being cancelled soon after last year’s election.
However, the real impact of the public sector cuts have yet to hit activity levels, as builders work through part constructed or already awarded projects.
“What the government does not seem to understand is that there needs to be a steady amount of work coming down the pipe for the industry, otherwise you get a gap in activity two years down the line,” said Stephen Ratcliffe, director of the UK Contractors Group, the industry’s trade body.
While the larger builders are likely to bear the brunt of the slowdown in new contracts, the smaller and medium-sized companies are likely to come under increasing pressure to secure lower value contracts as companies of all sizes compete for the shrinking pool of work.
The value of work awarded to UK construction companies crashed during the past year, raising concerns that the impact of government spending cuts will be far worse than previously feared.
The total value of new work awarded to the UK’s 50 leading construction companies fell by 39 per cent during the 12 months to May, compared with the same period a year earlier, as school, hospital and road building projects were shelved.
The decline in the value contract awards, down from £34.5bn to £21bn according to data compiled for the FT by industry research house Barbour ABI, was particularly skewed towards the large builders focused on state-funded infrastructure programmes.
Balfour Beatty, the UK’s largest construction company by sales, saw the value of orders in the UK fall from £7.4bn to £3.3bn during the period.
Meanwhile, Kier, a top five builder, saw a decline of £800m in the value of new contract awards to £1.6bn. Paul Sheffield, Kier’s chief executive, said the fall across the industry was sharper than he had expected.
“You never know how much to read into this data, but it is sending a signal; there isn’t as much work coming down the pipeline, especially while there is this hiatus on public sector activity,” he said.
The slowdown in workloads comes as the industry grapples to overcome two years of decline and its sharpest fall in activity for 35 years.
The cuts in spending on education, health and transport projects has already taken a toll on the building sector, with flagship Labour schemes, such as Building Schools for the Future being cancelled soon after last year’s election.
However, the real impact of the public sector cuts have yet to hit activity levels, as builders work through part constructed or already awarded projects.
“What the government does not seem to understand is that there needs to be a steady amount of work coming down the pipe for the industry, otherwise you get a gap in activity two years down the line,” said Stephen Ratcliffe, director of the UK Contractors Group, the industry’s trade body.
While the larger builders are likely to bear the brunt of the slowdown in new contracts, the smaller and medium-sized companies are likely to come under increasing pressure to secure lower value contracts as companies of all sizes compete for the shrinking pool of work.
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